SNDA (Subordination, Non-Disturbance, and Attornment) in CRE Leases
What Is an SNDA?
A Subordination, Non-Disturbance, and Attornment (SNDA) agreement is a three-part contract between a tenant, landlord, and the landlord's mortgage lender that establishes the relationship between the lease and the mortgage. SNDAs are essential in commercial real estate because they protect the tenant's occupancy rights if the landlord defaults on their mortgage and the property is foreclosed.
SNDAs are requested in approximately 75-85% of commercial lease transactions where the property is encumbered by a mortgage, and are required by most institutional lenders as a condition of financing. Without an SNDA, a tenant's lease may be extinguished by foreclosure if the lease is subordinate to the mortgage.
The Three Components
Subordination
The tenant agrees that their lease is subordinate to (ranked behind) the lender's mortgage. This means the lender's lien has priority over the tenant's leasehold interest. Without subordination, leases that predate the mortgage might have priority, complicating foreclosure proceedings.
Non-Disturbance
The lender agrees that if it forecloses on the property, it will honor the tenant's lease and not disturb the tenant's possession, provided the tenant is not in default. This is the most valuable component for tenants — it protects their occupancy and lease terms regardless of the landlord's financial difficulties.
Attornment
The tenant agrees that if the lender (or a purchaser at foreclosure) becomes the new owner, the tenant will recognize the new owner as their landlord and continue to perform under the lease. This provides the lender with assurance that rental income will continue flowing to the new owner post-foreclosure.
Why SNDAs Matter
For tenants: Without an SNDA, a foreclosure can wipe out the lease entirely if the mortgage predates the lease. The tenant would have no right to remain in possession, regardless of how much time and money they've invested in the location. For a retailer who invested $500,000 in buildout, losing their lease to foreclosure would be catastrophic.
For lenders: SNDAs provide income certainty during and after foreclosure. A property with in-place tenants who have signed SNDAs is significantly more valuable as collateral than one where foreclosure could trigger tenant departures.
For landlords: SNDAs are typically a lease obligation — the landlord must obtain an SNDA from their lender for each tenant. Failure to deliver an SNDA within the timeframe specified in the lease can constitute a landlord default.
Common SNDA Negotiation Points
Lender's form vs. tenant's form: Lenders typically provide their own SNDA template, which is heavily lender-favorable. Tenants (particularly institutional tenants and national retailers) push back on numerous provisions, including: limitations on the lender's liability as successor landlord, modification of lease provisions that bind the successor, caps on the lender's obligation to cure landlord defaults, and limitations on the tenant's offset and abatement rights against a successor landlord.
Cure rights: Whether the lender has the right to cure landlord defaults before the tenant can exercise remedies (rent abatement, termination). Lenders typically request a cure period of 30-60 days beyond the landlord's cure period.
TI allowance and concession obligations: A major negotiation point is whether the successor landlord (post-foreclosure) must honor unfunded TI allowances and other financial commitments made by the original landlord. Lenders typically refuse to assume these obligations.
How AI Extracts SNDA Provisions
- Existence detection: Identifying whether the lease requires the landlord to obtain an SNDA and the delivery deadline.
- Status tracking: Flagging whether an SNDA has been delivered and executed, or remains outstanding.
- Key terms extraction: If the SNDA is included in the document package, extracting the subordination terms, non-disturbance conditions, and any modifications to the tenant's lease rights vis-à-vis a successor landlord.
- Lender identification: Documenting the mortgage lender and loan details referenced in the SNDA.